1. What is the underlying problem in this case from CEO Brian Niccol’s perspective? (2marks)
2. What type of change Niccol need to inspire- reactive or proactive? Explain
3. Using Fig 10.1 on page 380, describe what forces for change exist both inside and outside Chipotle.)4. Utilize Lewin’s change model (Fig 10.2 on page 384) as a blueprint and describe how Niccol can inspire change at Chipotle?
Organizational Change and Innovation CHAPTER 10 405
10.4 Organizational Innovation
• Innovation is the creation of something new and
useful that gets commercialized.
• Crossing the types of innovation with the focus on the
innovation results in four approaches to innovation.
• Innovation can produce new products or new
processes and can vary in focus from improvement
to new directions.
• An innovation system’s seven components are
(1) an innovation strategy; (2) commitment from
senior leaders; (3) an innovative culture and climate;
(4) required structure and processes; (5) necessary
human capital; (6) appropriate resources; and
(7) human resource policies, practices, and
10.5 The Threat of Change: Managing
Employee Fear and Resistance
• Resistance to change is an emotional/behavioral
response to real or imagined threats to an established
work routine. Resistance can be considered to be
the interaction of three causes: (1) employee
characteristics, (2) change-agent characteristics, and
(3) the change agent–employee relationship.
• Ten reasons employees resist change are as follows:
(1) individuals’ predisposition toward change, (2)
surprise and fear of the unknown, (3) climate of
mistrust, (4) fear of failure, (5) loss of status or job
security, (6) peer pressure, (7) disruption of cultural
traditions or group relationships, (8) personality
conflicts, (9) lack of tact or poor timing, and (10)
nonreinforcing reward systems.
10.6 Career Corner: Managing Your Career
• There are two key methods for improving your
openness to change: self-affirmation theory and
• Self-affirmation theory reveals that openness to
change is enhanced by replacing negative thoughts
or beliefs about yourself with positive affirmations.
• You can increase self-compassion by practicing
self-kindness, reminding yourself that you are not
alone, and practicing mindfulness.
1. What are the two principal types of change?
2. Describe the four kinds of external forces of change
and two kinds of internal forces of change.
3. How does Kurt Lewin’s model of change work?
4. What is the organizational development process?
5. What’s the difference between a product innovation
and a process innovation?
6. Explain four approaches to innovation.
7. What are four steps for fostering innovation?
8. Employee resistance can be considered to be the
interaction of what three causes?
9. There are 10 reasons employees resist change. What
10. How can you increase the career competency of
openness to change?
Understanding the Chapter: What Do I Know?
Chipotle Needs to Change
Chipotle Mexican Grill started in 1993 with a single
restaurant and now operates in 2,400 locations, including in Canada, England, France, and Germany. The
fast-food chain had approximately 60,000 employees
and revenues of $4 billion in 2017.153
Steve Ells founded Chipotle and served as its CEO
until 2018. Ells wanted to differentiate his brand from
that of other fast-food chains, so he focused on fresh,
high-quality raw ingredients free of antibiotics and pesticides. Meals were prepared using classic cooking methods and were served in choose-your-own style so diners
could get the individual ingredients they preferred.154
Then the company’s growth and profitability were
stunted by outbreaks of foodborne illnesses. Customers
were sickened by E. coli, norovirus, and salmonella at
dozens of Chipotle restaurants around the United
States between 2015 and 2016.155 The restaurant’s stock
never recovered as shares fell nearly 60 percent between
2015 and 2018.156 Let’s examine what led to the burrito
maker’s fall from grace.
AS CHIPOTLE GREW, SO DID ITS PROBLEMS
Chipotle rose to greatness because customers were offered
a straightforward set of options, food was prepared on site
in an open kitchen, and diners felt they were eating
something healthy. The company had success with this
model early on, but the system started to crack as Chipotle
grew. Inconsistent food preparation was the first stressor.
The open kitchen proved a difficult model to scale, and
poor food handling most likely led to the outbreak of foodborne illness. According to the Chicago Tribune, “Chipotle
has been growing too quickly, and without a game plan.”
The restaurant chain was plagued by inconsistency and
inefficiency.157 Foodborne illnesses continued to haunt it
almost two years after the initial outbreak. In 2017, “The
Management in Action
406 PART 4 Organizing
rate of food poisoning reports attributed to Chipotle continues to be multiples higher than peers,” said Business
158 These statistics are especially troubling for a
brand that prides itself as providing “Food with Integrity.”
The restaurant’s menu reflects another crack in its
vision and strategies. Chipotle offers burritos, tacos, burrito bowls, and salads. This simple menu attracted customers for over a decade but is now seen as “stale,” according
to an analyst with the Tribune.
159 Ells began offering queso
in September 2017 in an attempt to spice up Chipotle’s
menu. The results were not promising. Only 15 percent of
orders included queso, compared to the 40 percent of
orders that included guacamole. Business Insider reported
that queso-related traffic died off after peaking the first
week the new item was available.160
These problems have created opportunities for other
fast-casual restaurants such as Qdoba and Moes, which
are opening locations all over the United States. According
to a UBS analyst, “. . . these concepts are exhibiting significant growth rates while also increasing competition for
attractive market/site selection.” Chipotle’s once unquestionable market leadership is on shaky ground.
CHIPOTLE’S NEW CEO WAS SUCCESSFUL
AT TACO BELL
Chipotle named Brian Niccol CEO in 2018. Niccol had
been Taco Bell’s chief marketing officer from 2011 to
2015 before taking over as its CEO.161 He was hired at
Chipotle because of the successful turnaround he had
overseen at Taco Bell.
A disgruntled customer had filed a lawsuit in 2011
alleging Taco Bell’s taco mixture was more filler than
beef. The suit was later withdrawn, but it took a toll on
Taco Bell’s reputation and sales. Niccol’s change efforts
focused on repositioning the chain as a youthful lifestyle
brand. He did this by welcoming ideas from restaurant
employees and introduced new menu items, including
breakfast.162 These changes produced impressive results.
Taco Bell posted an average of 4 percent sales growth
during Niccol’s time as CEO.163 The fast-food chain also
beat out Pizza Hut and KFC as the most successful restaurant in the Yum Brands portfolio.164
NICCOL’S CHALLENGE AT CHIPOTLE
Niccol faces three challenges at Chipotle. The first is the
menu and potential resistance to changing it from the
company’s senior leadership. The second is increased
competition taking advantage of the company’s past problems, and the third relates to Chipotle’s food preparation
practices and their contribution to foodborne illness.
Niccol first needs to address Chipotle’s menu problem. According to a CNNMoney analyst, “They need
something that gets people talking about the brand
again.” The analyst says that Chipotle should consider
adding new menu items such as nachos or frozen
margaritas. Niccol may be positively disposed to this
suggestion because he was also the architect of Taco
Bell’s positive move to offer breakfast and Doritos
Locos tacos.165 Other analysts have concerns about the
company venturing too far from its core offerings.166
Those who are skeptical about changing the menu
include Chipotle’s founder and current executive chair,
Steve Ells. Ells still yields significant power and is
known as a hands-on leader and perfectionist, according to The Wall Street Journal.
167 He told The New York
Times, “It’s not like you can put a whole new thing up
on the menu board and—like at a typical fast-food
place.”168 This view is supported by Ells’s earlier strategic failure of adding queso to the menu.
Niccol is likely to experience resistance to some of
his ideas because Ells does not believe Chipotle is like
Taco Bell. Chipotle is more vulnerable to suppliers’
changes in the price of items such as avocados and
chicken. Other fast-food brands can push increased
costs to franchises—something Chipotle does not have.
Ells also refuses to compromise on quality as part of
any change. “I don’t think you’re going to see a situation where someone says, ‘To hell with food with integrity. We’re going to buy cheap commodity meat now
and really turn this thing around,’” he told the Times.
Chipotle’s second challenge is increased competition, and the biggest threat here is Panera. Panera is
outside Chipotle’s cuisine niche, but it is competing
with its promise of fresh, additive-free ingredients. It
also has an exhaustive menu that rotates seasonally.
Chipotle customers who are tired of its “big-four” menu
will easily find a Panera nearby; Business Insider reports
that 87 percent of Chipotles compete with a Panera
Bread within a 10-minute drive.170
Niccol will have to do more than change Chipotle’s
menu if he wants to compete with Panera. He needs to
address his third challenge, which is stopping people
from getting foodborne illnesses at his restaurants. The
new CEO might accomplish this by slowing the chain’s
growth and focusing on safer operations. For example,
each of Chipotle’s approximately 2,400 locations does
its own prep work, such as washing lettuce and chopping tomatoes.171 Although this practice is part of
Chipotle’s operational vision, an analyst from the
Tribune suggested that “[Chipotle managers have] to
keep to their core values . . .but need to find a way to be
more consistent and efficient.” The analyst recommended that Chipotle wash and prep food in a central
location and send it out to nearby stores.172
Such a food preparation change will significantly alter
Chipotle’s restaurant structure. Customers may no longer
walk into a restaurant and see employees grilling meat
and chopping vegetables behind the food line. This setup
has been part of the chain’s vision and heritage and represents something Ells holds near and dear. “Niccol will
likely face an uphill battle in uprooting some of that heritage, as he’s stepping into a role occupied by a founder for
the past 25 years,” said an analyst to Business Insider.
Can Niccol inspire change and save Chipotle?